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Firm heterogeneity, comparative advantage and the transfer problem

Author

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  • Federico Trionfetti

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper studies the transfer problem in a model featuring comparative advantage, mo-nopolistic competition, trade costs, and firm heterogeneity in factor intensity. The results are very different from those of the previous literature. First, a transfer creates a secondary burden in situations where the neoclassical version of the Heckscher-Ohlin model would not. Second, a transfer affects wage inequality. Third, a transfer is not neutral to world welfare. Fourth, floating exchange rates do not substitute for deflation. Fifth, a simulation exercise shows that the quantitative effects of trade imbalances are comparable in magnitude to those arising from major trade agreements.

Suggested Citation

  • Federico Trionfetti, 2018. "Firm heterogeneity, comparative advantage and the transfer problem," Post-Print hal-01921170, HAL.
    • Handle: RePEc:hal:journl:hal-01921170
    DOI: 10.1016/j.euroecorev.2018.07.007
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-01921170
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    Cited by:

    1. Hendrik W. Kruse & Inmaculada Martínez‐Zarzoso, 2021. "Transfers in the gravity equation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 410-442, February.
    2. Picard, Pierre M. & Worrall, Tim, 2020. "Currency areas and voluntary transfers," Journal of International Economics, Elsevier, vol. 127(C).

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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